Moving in the right direction

The SCSI’S Annual Residential Price Report points to some long-awaited stabilisation in the housing market, but supply remains an issue.

Following several years of turbulence, the Irish property market may finally be set for a period
of relative calm. While that may be a very welcome development, the sector will continue to generate
its fair share of challenges. After several years of high-single-digit – and for a period double-digit – price inflation, Irish property prices appear to be pausing for breath. This is borne out in the SCSI’s
‘Annual Residential Market Report: Review and Outlook 2019’, which predicts that prices will rise by 5% in Dublin and 4% around the country.
Double-digit or high-single-digit price inflation is not sustainable in the long term and everyone in the market will be happy to see a return to more modest price growth. We’ve also seen a steady climb in the level of transactions over the last couple of years, and this is another positive indicator of a return to a more normal functioning market. However, even if tighter Central Bank lending rules have
been successful in reining in inflation, prices have still risen significantly in recent years.
The Government-supported Help to Buy (HTB) incentive is a scheme designed to assist first-time property buyers. According to a recent property report by MyHome.ie the scheme reportedly afforded the average purchaser a rebate of approximately €15,000. The scheme is due to expire in December 2019, but given the current supply shortages affecting the market, the hope would be that the Government will consider extending this initiative.
More and more new homes are coming to the market, giving buyers greater choice. As these come with A-rated energy efficiency in addition to the benefits of the Help to Buy scheme, first-time buyers will in many cases opt for the new build home.

Supply
Approximately 53,500 homes were built between 2011 and 2017, a shortfall of about 31,000 based on Government estimates. There is annual demand for in excess of 35,000 new homes throughout the country, but with approximately 18,000 constructed in 2018 there will continue to be a shortage of houses until output improves.
According to the CSO, approximately 60% of all new build homes completed in 2018 were in the Dublin region. There is increased demand to build apartments in Dublin, and with apartments making up about 12% of last year’s completions, more and higher densities need to be built in the city and surrounding commuter belt.
Despite the pent-up demand that exists, the rising cost of construction for smaller builders is a barrier to increasing supply. Larger PLCs and building firms like Glenveagh are in a stronger position to handle this challenge and will be the main drivers in supplying a higher volume of new homes to the market for the foreseeable future. For example, Glenveagh, which was only established in 2017, completed 275 units last year and will complete 725 units this year, mainly in the Dublin commuter belt and Cork.

Irish property prices appear to be pausing for breath.

The shadow of Brexit
One of the main issues contributing to uncertainty in the market is, of course, Brexit. The Joint
Committee on Housing, Planning and Local Government has been examining the potential impact of Brexit on the housing market and it was very interesting to see that one of the issues they highlighted in their recent report was the number of unknowns, both potential positives and potential negatives, which exist. The next number of weeks will be important for determining what the long-term impact on the housing market is likely to be.
The future
Clearly the pressing need at the moment is to increase supply and meet the huge demand that
exists for affordable and starter homes. However, we also need to look to the future, including
the changing make-up of Ireland’s population and the kind of housing units they will require.
Demographic projections indicate that the number of older people living in Ireland is set to grow
dramatically. According to Census figures, there are currently 638,000 people aged over 65 years
of age in Ireland and this figure is expected to grow to 855,000 by 2026, and to nearly 1.4 million
by 2046. And so, while we need to adapt and innovate to meet current challenges – including the
changing needs of modern families and single people – we also need to provide flexible solutions
and community living options to our increasing elderly population.